Apple said to be stealing tech from expensive suppliers to give to cheaper ones
A new report claims that a supplier may develop new technology or new processes, only for Apple to -- perfectly legally -- take that work to a cheaper company, sometimes leaving the original one to go bankrupt.
Apple has suppliers all over the world
There have already been examples in 2024 of how being an Apple supplier may not be a great idea. While no parties involved will directly confirm it, it appears that Apple abruptly cancelled two micro LED suppliers -- one of whom had spent $1.4 billion building a factory for it.
Reportedly, those firms have no recourse with Apple, and presumably it's because the cancellations were allowed within the contracts. According to The Information, Apple's typical contracts also give it complete control and at least co-ownership, over every step of the supplier's manufacturing process.
That means a firm can invest in developing a production technique, and Apple is entirely within its rights to take that process to another firm. The accusation is both that Apple does this, and that it does so by giving information from US companies to suppliers in China.
For instance, in 2014, GT Advanced Technologies was working with Apple on creating a scratch-resistant screen material. As reported in AppleInsider the supplier went under owing almost half a billion dollars -- all of which it attributed to Apple's increasing demands and refusal to renegotiate.
It's claimed now that once the firm had declared bankruptcy, Apple took its the material recipe GT Advanced Technologies developed, and gave it to suppliers including Hong Kong-based Biel Crystal. According to unspecified former employees, Apple also gave the details to a firm called Lens, and has subsequently played each company off against the other to get better prices.
Apple is accused of having spent years helping Chinese display maker BOE match the quality of displays being made by Samsung. South Korea's Samsung filed a lawsuit against BOE in November 2023 -- though that may solely have been a retaliatory response to BOE accusing it of stealing patents.
The allegations against Apple do not make it clear how common a practice of using costly suppliers to create technology for cheaper and Chinese ones. However, it is also claimed that China's SeeYa Technologies has benefited from it as Apple reportedly passed it details of how Sony is making the Apple Vision Pro.
In that case, Sony had reportedly refused to increase its production capacity for the Apple Vision Pro, so it's not a surprise that Apple would look for an alternative.
It's also clear that whatever information Apple does or doesn't pass on to alternative suppliers, it is entirely within its contractual rights to do so. That's true whether its engineers verbally teach new suppliers, or even if they provided documentation about processes.
Perhaps showing that firms are becoming wise to Apple, BOE reportedly dragged its feet over committing investment funds into a new facility. BOE has also now entered into a deal to help India's Samvardhana Motherson make iPhone cover glass -- and can buy up to 49% of shares in that firm.
This is despite BOE having reportedly had a rocky relationship with Apple over unauthorized changes in its iPhone screen manufacturing.
Apple has not commented.
Read on AppleInsider
Comments
If you don't like the terms or don't think you can deliver then don't sign. It's their greed to cash in on the Apple supplier train that made them think they could when they knew they couldn't.
While no one here has read any contracts between Apple and its suppliers, it is blatantly obviously that Apple is at least part owner of the intellectual property produced in these partnerships which is why they aren't getting sued. This is not unique to Apple and its suppliers, these sort of contracts are written all the time by various parties.
Clearly these contracts include language that allows this to happen and both parties signed on the dotted line. Most likely Apple fronted much of the development costs because they are loaded with cash. This is the similar to Apple hogging up most of TSMC's capacity on their latest-and-greatest node technology because Apple prepays. Cash is king. Always has been, always will be.
If these suppliers don't like Apple's terms, they shouldn't sign the contract. They could try to rewrite the contract(s) to be more favorable to them but Apple holds the purse strings.
It is also obvious that the lawyers for these suppliers educated their CEOs on what could happen. That's why these companies silently watch Apple waltz away with the IP because Apple holds the pink slip.
There are no longer "relationships" in business as there once were, and negotiations with accounts have been handled accordingly for over a decade now.
The most important pieces of information are the contract details themselves which no one here will ever find out.
The root problem is that some of these suppliers can't live up to Apple's expectations and their agreement allows Apple to take the IP elsewhere. If you don't like Apple's terms, don't sign contracts with Apple. Plain and simple just as Gatorguy's situation with Bombardier and Walmart.
And Bombardier and Walmart probably found someone else to work with. They're not imminently filing for bankruptcy as far as I can tell.
This is the way business is conducted in the 2020s. And not just the tech industry. If you want to seal a deal with a handshake, find someone who will extend their hand. Just don't ask Apple. Whether it's Tim Cook, Satya Nadella, Warren Buffett, Jamie Dimon, Mary Barra, Larry Ellison, they will all push a contract across the table.
I agree that at the end of the day, you want to be able to smile about your business and its partnerships because it's pretty hard to run a business in 2024 all by yourself with no help.
Small companies get enamored by being suppliers to large volume buyers, like Apple and so end up signing these one sided contracts. Specially in poor Asian countries, where being such a supplier means a change in fortune
I assume that is why Samsung phones have a 50MP camera sensor since a while now, but Apple has nothing even close to that
And listen: none of this is to suggest that Apple plays nice with its suppliers. I'm sure they don't. Apple is always the 800 pound gorilla in the room, they know it, and they're undoubtedly going to push for or insist on egregiously favorable terms because they can. But no supplier is required to sign up for that.
AppleInsider should be embarrassed about giving this article the title that they did.
Nowhere in the article does it support the notion of "stealing" if the signed contract says that Apple at least co-owns the tech.
Ethical? No, but if Apple was paying the supplier while that supplier developed the process or technique, then one can say that Apple does own it, and the contract supports that.
As a software engineer, I experience this all the time with clients. They can't see the grey areas between their product and my technology solutions developed in-house.